Over the last 6 years since starting my business, Investment returns in South Africa have been what many like to call flat. In other words, they have moved sideways. Yes, some years are better than others and some are worse. The discussions have ranged between, which is the better manager performance-wise, to who charges performance fees and lastly the hotly argued, should you be using Passive Managers or Active Managers. Basically, should you let a person do the investing for you or a computer program?
With the unbelievable swiftness of the market crash in March 2020, it did not matter which, what or where you invested, the effect was across the board. The questions that have been raised is why was it so swift and why so deep? We have had crashes before, the last being 2008, yet this seemed to be extreme. I question how much emotion was involved in the trading conditions when panic set in. Have we lost the knowledge, experience and the calm emotions of the past; when the rule was always step back, take emotion out and find the root-cause and make cautious but calculated moves. The “get rich quick”, need to own all rising stars and political interference has taken its toll on the markets. Investors are being swayed by what is said by friends, the media and constant information bombardment from the various social media platforms. Simply put, the pressure to be the best and to be ostentatiously wealthy has led to many poor decisions and severe loss.
There is no quick solution to investing and there are no “get rich quick” schemes. The basics of all investing are consistency and time. These pillars have never changed. Trying to time the best date to invest or the best date to withdraw never works. You could decide and the next day could be better or the day you chose will have an event which makes it worse. Set the goal you want to achieve and work towards it. Ignore the noise and the market movements. Stay focussed and religiously make the payments. The beginning of all investing is difficult as values change daily, but with time the risks reduce and the increases outweigh the changes.
But, how do you work out what your investment is actually doing? Our natural instinct is to look at the Rand value, but this is not a reflection of your returns. This is the value you can sell your underlying units for on that date. This value changes daily and is not a reflection on what you have achieved. I recommend looking at the underlying unit value and focussing on whether these have accumulated over time or not. Each unit purchased is like a marble, they are all the same size and colour. But each marble is purchased for a different value. 1 month you will get 3 marbles for R100 and the next month you will get 6. The important part is that you are getting marbles and not losing them. The aim of investing is to accumulate as many units as you can. When it comes to needing the money, you try and sell the units for the best price you can.
It is easy to get caught up in the panic of a stock market crash and the worry of the value of your investment. But even through these times, it is the number of units that you have that is important. Did your units keep growing through this time and were you able to get more units than you had before, to maximise your future monetary value? It is for these reasons that many people have obtained wealth in the past. Their consistency to keep investing through the good and the bad times is where they built their wealth and their foundations.
How you choose to invest, being with an Active Manager or a Passive one or using a performance fee manager or a flat fee manager, means very little if you are not being consistent. Yes, choosing riskier funds could get you more interest in the future, but conservative and more consistent funds work just as well, as they give you a little each month which grows. As an adviser, time and experience is what is needed to help clients. Do we get it right every time, with every client? Sadly not, but, staying up to date, attending all the investment presentations and focussing on the news is the service we provide to help guide our clients to the right investments for them. No client is a tick box that meets a set risk profile. Emotions, feelings and stories are there. Finding a solution that meets their personal needs is the service we provide. Conveying the feedback to the client in a way that makes sense to them, is the extra. Our job is to watch and to make the difficult decisions of buying and\or selling. These are never easy or taken lightly. Investing with an Adviser you feel comfortable with, is how you will slowly move towards the goals you have set. Stay calm and keep investing. If you would like to invest, contact me Joe Webster and we will put together an investment plan that will work for you.
Joleene Webster Cell: 084 463 2406